Union Budget 2016: What’s in it for the manufacturing industry?

The Union Budget 2016 announced by the Finance Minister, Arun Jaitley, is being cited as a mixed bag of announcements. Needless to say, it has been no different for the manufacturing industry as well, bringing reasons to rejoice along with some concerns.

Although the government had to be on a precarious course juggling between economic and social developments all at once; the intent of this budget has been positive overall.

The manufacturing industry is mostly poised to benefit from the government’s strong focus on reviving the rural economy and boosting infrastructure and connectivity. Both these factors will significantly drive consumption and economic growth, and will also prove favorable for the automobile industry in the long run.

Increased allocation of funds in rural India will help the money trickle down to end-users, boost their purchasing power and consumption, and will lead to increased demand for vehicles.

Infrastructure development has always been prerequisite for growth, which has been taken well into consideration in this year’s budget.

Government’s focus on road development, including national highways and rural roads will improve connectivity and in turn, will help increase spends on commercial vehicles.

The manufacturing industry is mostly poised to benefit from the government’s strong focus on reviving the rural economy and boosting infrastructure and connectivity.

What particularly stood out in this year’s budget was the proposal to institute India’s first ever rail auto hub in Chennai.

It is a concept that will aid the manufacturers to a great extent as it will cut down the logistics, enhance the last mile connectivity for shipments, and ease the logistical issues for the manufacturers.

In a country like India, it is important to have impetus on manufacturing sector to drive the economic growth, while creating jobs for our large youth population. Keeping with that, the Union Budget 2016 has made room for Skill India mission, which will create a job-ready workforce by training 1 crore youth over the next 3 years.

Steps like introduction of Rule 7B to Cenvat Credit Rules have also been welcomed by the industry as the amendment will help the manufacturers who run multiple manufacturing units in maintaining a common warehouse for inputs, and distribute inputs with credits to the individual manufacturing units.

While the budget has brought more good news than the bad for the manufacturing industry, there are still inevitably some areas of concerns.

At the time when more R&D spend is required to drive innovation, curbing incentives on in-house R&D spends from 200% to 150% is expected to have a negative effect and defy the indigenous R&D in India.

Furthermore, levying extra taxes and cesses on purchase of cars may have an adverse impact. It is very likely to be damaging for the auto components players by negatively affecting their margins owing to steep rise in vehicle prices.

Except these few anomalies, the budget has met the expectations of the manufacturing industry as a whole.

In the time when the global economy is going through socio-political unrest, the government has done a fair job in meeting both economic and social objectives, while keeping the fiscal discipline in control and giving no major negative surprises.

DISCLAIMER: The views expressed are solely of the author and ETAuto.com does not necessarily subscribe to it. ETAuto.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.